Share Price, page-8673

I think everything you've said is spot on if there’s only one bidder.

If you’re the only bidder you will of course try to buy as low as you can. It will make sense to base your initial bid on a premium to the current share price hoping shareholders will accept it.

As you’ve said, even if your internal valuation is $100 (ie it would still be worth it to you acquiring Neuren at this price) you certainly won't offer this price if you can get away with a much lower value.

And I suspect it's likely most Neuren shareholders would accept an offer at a 75% premium which might be around $40-$50.

But if there are multiple bidders then the above reasoning is no longer valid.

If there’s multiple bidders that the board and shareholders consider are all equally capable in their ability to fulfil their offer then the calculation for a bidder becomes – what’s the value I can bid that is no higher than my internal valuation AND is higher than the other bids?

If 3 bidders internally value Neuren at $90, $100 and $110 respectively, then all else being equal bidding would theoretically finish at $101, the price at which only 1 bidder is left willing to pay. The initial share price will have little to do with this.

Of course, if you’re talking about an unusual asset that could make a significant difference to your future revenue and market position - one that might allow you to dominate a huge new under-served market (CNS disorders anyone?) and significantly increase your business size long term then other factors come into play. Because if you lose this asset to a key competitor the damage is doubled. You lose X and they gain X. The difference between winning and losing is now 2X. If you lose you could be handing your competitor a major advantage against you in the market going forward.

This is why in some spaces (particularly tech, the area I'm familiar with) bidders can pay way over the odds simply to stop an asset falling into a competitors hands.

Another factor that could mean a bidder may go well beyond their comfort level (ie well beyond their internal valuation) is because they’re desperate to maintain their existing business size and pretty much have to do whatever it takes to achieve this. I understand many large pharma are facing looming patent cliffs, meaning they may not have the luxury of waiting to pick the most profitable deals (i.e. the ones where they get to buy at a low price). If they have to replace $50 billion of revenue by an immovable deadline (patent expiry dates) then the closer those dates come the more willing they will become to take risks - ie pay over the odds, just to keep their business from going into decline. Their shareholders will not be happy if they do otherwise.

Neuren does appear to own such a market making asset. NNZ-2591 is not just drug that treats another obscure type of cancer.

If Neuren management know that Neuren is worth $100+ to large pharma they have a fiduciary duty to do whatever it take to try and extract this amount from these guys for shareholders.

For all the above reasons I suspect when it comes to a takeover that there will be many bidders and Neuren management will then organise a tender or something similar (someone mentioned Jon asking Big Pharma to please form an orderly line ). I believe the final T/O offer will be over $100 and there is a good chance it may be $250 or more (US$20b).

If Neu wait for the next 3 Ph 2 results (which you’d have to say now seem more likely than not to all be positive) AND we get yet more runs on the board with Daybue in the meantime, I suspect we’ll already be at $50 by late next year so a $100 TO offer will no longer upset those people worried about high takeover premiums!